ST to exit ST-Ericsson in 2013

LONDON – As part of a strategic plan to improve its financial situation European chip company STMicroelectronics has announced its intention to exit from its mobile digital joint venture ST-Ericsson. ST announced in a conference call Monday (Dec. 10) that it intends to have left the joint-venture by the end of the third quarter of 2013 and that it is already in negotiations on the options.

At the same time CEO Carlo Bozotti told analysts that ST would focus on five key product areas where it already leads in the global market or where it can soon be the leader. These five product areas are MEMS and sensors, smart power, automotive electronics, microcontrollers and application processors for digital consumer.

In the area of application processors ST will abandon the mobile digital sector but continue to make set-top-box chips, cable modems, DisplayPort connection chips, network processors, car infotainment and ASICs for gaming.

As part of the re-organization ST will be divided into two product segment groups: sensors, smart power and automotive and embedded processing, Bozotti said. Both segments are expected to be profitable and cash generating.

ST said the changes will reduce the company's quarterly net operating expenses from about $900 million to between $600 million and $650 million by the beginning of 2014 excluding restructuring charges. The business would target 10 percent or more operating margin.

In separate announcement Ericsson said it would work with ST to find a
suitable strategic solution but did not announce an intention to sell
its stake in the joint venture. "Ericsson continues to believe that the modem technology,
which it
originally contributed to the joint venture, has a strategic value for
the wireless industry," the company said in a brief statement. "For
Ericsson, a key priority in this process is a
successful market introduction of the new LTE modems that it is certain
will be very competitive and needed in the market," it added.

"Mobile broadband is a very important market but not for ST," Bozotti told analysts during the conference call.

Click on image to enlarge.

Major changes in the wireless market over the last three years have driven ST's decision. Source: ST's strategic plan presentation.

ST said it will continue to support ST-Ericsson with application processors, IP and manufacturing process technology during the disengagement. This will include the fully-depleted silicon-on-insulator (FD-SOI) process which ST has pioneered at 28-nm and with a road-map to 20-nm.

Meanwhile will not abandon the mobile digital market altogether. It will still manufacture motion, environmental, image and touch sensors for that market; as well as audio amplifiers, microphones, secure microcontrollers, AMOLED display drivers.

However, Bozotti and ST declined to comment on the current value of the ST-Ericsson joint venture or what sort of costs disposal of ST-Ericsson would incur if it could not achieve a sale of the business.

ST-Ericsson has been losing several hundred millions of dollars per quarter since its formation in February 2009 and has built up large debts with
its parent companies. Bozotti said that ST-Ericsson had been caught out by a dramatic change in the mobile digital equipment market that started about two years ago with changes in operating system and a trend towards vertical integration amongst certain market leading companies. ST-Ericsson had also suffered because of change at a former major customer of ST's, Bozotti said.

Increasingly people say there is little advantage in the heavy lifting of designing a custom core because ARM is coming out with solid cores every year.
It may be true that ARM hollows out tech innovation at SoC players with key cpu and gpu cores just as Intel did to PC makers by owning the high value ingredient.

Another one bites the dust....More proof that ARM is bad news for everyone. ARM brings nothing but commoditization. Nobody wins in the commodity market. We went thru TI, Freescale, STE. Next one is Marvell, then Broadcom. Send ARM back to UK.

When its said that STM soon can be global leader in number of application I think its just word of mouth from their CEO. Sure one area STM is in very sensation and popular situation right now is their MEMS and sensor business, but other like application like car infotainment, gaming devices,set top box chip-set or DSP will not become leader although in time to come. If we go inside many application today like smartphone, tablet, GPS, set top box and etc, there are few STM made chips in it. The likes of Atmel, NXP, TI, Marvell and Qualcomm if oftenly found. Like Micro-controllers how STM want to beat the likes of Renesas, Freescale, Microchip Tech., or TI that is more innovative products.In car infotainment chips from Freescale, NXP, TI and emergence vendor like Nvidia is popular and hard to beat. That's all.